The Primary Limitation of Using Economic Value Added (EVA®) to Evaluate

question 116

Multiple Choice

The primary limitation of using Economic Value Added (EVA®) to evaluate the financial performance of investment centers is:

• A) Complexity of the calculation.
• B) Dysfunctional long-term investment decisions that can be motivated by focusing on EVA®.
• C) Failure to include a measure of invested capital.
• D) Inability to use EVA® to benchmark against competitor organizations.
• E) Inability to align managerial incentives with ownership interests.

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Definitions:

Contraction

Contraction refers to the process of muscle fibers shortening in length to produce movement, a response critical for various bodily functions including locomotion and organ operation.

Aerobic Respiration

A metabolic process in cells involving oxygen to convert glucose into energy, producing carbon dioxide and water as byproducts.

ATP

Adenosine Triphosphate, a molecule that carries energy within cells, enabling metabolic processes.

Glucose Molecule

A straightforward sugar, important for energy production in living creatures, and a fundamental part of multiple carbohydrates.